Who Will Oracle Buy in 2009?

Who Will Oracle Buy in 2009?
by Bruce Richardson

IPOs and M&A activity in 2008 were barely existent in the tech sector, according to a new report from National Venture Capital Association and Thomson Reuters. Oracle was one of the few active companies. January has traditionally been a very busy month for the Oracle acquisition team, but as the economy struggles, what is in store for 2009?

We barely had time to bid 2008 a hearty good riddance before coming across data published by the National Venture Capital Association (NVCA) and Thomson Reuters. The two organizations teamed to provide data on the sorry state of the market for tech sector IPOs and mergers and acquisitions.

All told, there were six IPOs last year, with five in the first quarter and one in Q3.This was the lowest total since 1979, and it represents a dramatic falloff from the 86 IPOs in 2007. While there are 28 companies that have filed to go public, even magician David Blaine wouldn’t be able hold his breath until the IPO gates re-open.

On the M&A side, NVCA and Thomson Reuters tracked 260 deals involving venture-backed firms. The deal count was exactly 100 lower than 2007. The deals were smaller, too. Buyers spent a total of $13.92B in 2008 based on deals in which the price paid was disclosed. Compare that to the $28.41B paid in 2007. See our newly revamped blog for more, and please note the new location: http://blogs.amrresearch.com/enterprisesoftware.

When The New York Times wrote up the study results, the reporter noted that Cisco Systems normally buys 10 to 15 tech companies each year. The company made only five purchases in 2008.

Oracle makes one big buy each year

While Cisco may be reluctant to whip out the checkbook, the same is not true at Oracle. Last year, Oracle purchased 11 companies, the same number as 2007. For the past four years, the company has added 48 companies to its roster (more on our blog on this too).

Over that period, Oracle has announced at least one big purchase per year. If you look at the Oracle website, it appears that the biggest deals are done in the first calendar quarter. Last January, the company made a bid for BEA for $8.5B. In March 2007, Oracle trumpeted its plans to acquire Hyperion ($3B). The website said that the Siebel deal was inked in January 2006, but the press release had the $5.85B offer occurring in September. The same site said that PeopleSoft agreed to be acquired for $10.3B in January 2005. As I recall, the deal was signed in December 2004.

Who will it be in 2009?

The landscape has changed dramatically since the PeopleSoft deal. The most noticeable change is the shortage of midsize software vendors with values in the $2B to $10B range. Here’s a close look at companies in that range based on the closing price of January 8, 2009:

• CA—$9.4B
• Intuit—$8.11B
• BMC Software—$5.02B
• salesforce.com—$4.02B
• Citrix Systems—$4.2B
• Teradata—$2.81B

Based on that list, salesforce.com looks like the most appealing. For companies less than $2B, take a look at the blog, where we give our thoughts.

What do you think?

Will Oracle pull the trigger on a big buy this year? Can Larry Ellison and team find another 11 companies worth acquiring in 2009, or is that streak in danger? Would you bet February’s mortgage payment on an Oracle-salesforce deal?